Why Carter's (CRI) Is Up Today

NEW YORK (TheStreet) -- Carter's (CRI) was gaining 7.8% to $73.98 Wednesday after beating analysts' estimates for earnings and revenue with its fourth quarter results.

The clothing company posted earnings of $1.02 a share in the fourth quarter, beating the Capital IQ Consensus Estimate of $1.01 a share by 1 cent. Revenue rose 11.6% from the year-ago quarter to $769.6 million. Analysts estimated revenue of $759.95 million for the quarter.

Looking to the first quarter, Carter's expects earnings to grow between 10% and 15% to about 87 cents to 91 cents a share. Analysts expect earnings of 86 cents for the quarter. The company expected revenue to grow by 8-10% to about $638.3 million to $650.1 million, compared to analysts' estimates of $648.7 million.

TheStreet Ratings team rates CARTER'S INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate CARTER'S INC (CRI) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins, increase in stock price during the past year and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

Despite its growing revenue, the company underperformed as compared with the industry average of 17.0%. Since the same quarter one year prior, revenues rose by 13.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.

Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, CARTER'S INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.

CARTER'S INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CARTER'S INC increased its bottom line by earning $2.69 versus $1.94 in the prior year. This year, the market expects an improvement in earnings ($3.35 versus $2.69).

43.81% is the gross profit margin for CARTER'S INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 7.33% trails the industry average.

Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.